Higher rate taxpayers in the UK will be given an extra £600 “tax free perk” under a new scheme designed to encourage more people to take financial advice about their retirement. Starting this April, the “Pension Advice Allowance” will mean that savers can get early access to some of their pension (up to a total of £15,000), as long as they use it to pay for advice.
The Telegraph reports –
“It means that pension savers can take up to £1,500 out of their pension pot tax-free in order to pay for advice… The move means that higher-rate tax payers, who would normally pay 40pc on any withdrawals from their pensions, will effectively save £600… Withdrawals from pensions are normally charged at the individual’s income tax rate, before the Pension Advice Allowance is launched. If a higher rate taxpayer were to withdraw the full £500 on three separate occasions, without using the new allowance, they would face a tax penalty of £600… A 20pc tax payer would save a tax bill of £300 on the full £1,500 withdrawal, under the new scheme… However, someone with an income of less than the tax-free allowance of £11,000 would not pay any tax on the withdrawal, so long as the withdrawal did not take them over that limit.”